Podcast: Freeze tariffs, not trade, AfA’s Fried says

Jeff Lee
Hello and welcome to this episode of cargo facts connect, the podcast of cargo facts, the newsletter of record for the air cargo and freighter aircraft industries for over 40 years. I’m Jeff Lee, editor of cargo facts and it’s Friday, the 23rd of May. In this episode, we hear from the Airforwarders Association’s Executive Director Brandon Fried, who spoke with my colleague, Deputy Editor Yael Katzwer, at last week’s CNS Partnership Conference in Miami about trade, tariffs, the TSA and the FAA.

Yael Katzwer
Okay, so what would you say right now are the top concerns for the air forwarders Association?

Brandon Fried
Well, the top concern right now is these tariffs and the adverse impact it’s having on freight volumes. We saw the President’s announcement on Monday of taking a break for 90 days, and reducing the tariffs the 30% on China is encouraging, but in and of itself, you know, it’s still a 30% tariff, and it’s still going to have an adverse impact on trade flows. We’re also concerned about the bullwhip effect that this has, because, you know, the you had a good percentage of ships that were canceled coming into the Port of Los Angeles. Now those sailings will resume, but you know that brings the potential of bottlenecks at the port much the same as we saw during COVID. We think that will be probably a spike, cause a spike in demand for air cargo. So, you know that’s, that’s the big thing that we’re looking at right now. We’re still very much concerned about other issues. I’ll give you one by example, is what’s going on? Transportation security, administration, thankfully that the White House just named a new interim administrator. Ha McNeil is her name, and we’re glad that at least the White House is stepping in, but we’re very concerned about the talent drain that seems to be happening there, where especially the air cargo division, where many of those who’ve been there for quite some time are now leaving the agency, and that’s a concern for a number of reasons. Policy continuity, enforcement continuity. We’re very concerned about the gutting of the aviation security advisory committee that has yet to resume. The air forwarders, associations had an appointment on that committee for it’s a federal advisory committee. We’ve had an appointment for close to 20 years, and it’s a diverse group of stakeholders, not only including pilots and flight attendants, but victims groups. We represented air cargo, and it gave us good opportunity to provide insight to the TSA, the administrator, the policy makers, and for their them to share their insight with us as to why they’re making decisions on policy that we may not completely understand. So big concern.

Yael Katzwer
So without having that seat right now, how are you communicating with the administration? Or are you not?

Brandon Fried
Yeah, so our communications are still ongoing, because the core stakeholder engagement group is there, as a matter of fact, they released two security program revisions for comment last week. One was for the screening procedures, the SS pack. One was for the certified screening program. Those two came out, and there will be a comment period with comments due by June 30. So at least we were talking to about that, and we’re expecting a revision to the canine program, canine screening program, as well as the indirect air carrier standard security program, so we have to have some discussion with them. But for instance, we saw one of their top two, their top technology people leave, and I think that’s a big loss for the agency. New people have not been named yet, and these are people who were intimately involved with screening technology for air cargo and passenger cargo, or in passenger baggage as well. So yeah, the answer is, we are, we’re engaged with them, but the top policy makers are leaving, and it’s a big concern.

Yael Katzwer
AndI remember the air cargo conference, there wasn’t representation from the government there

Brandon Fried
And there’s no representation here you might notice. We’re seeing that across the federal government right now. We, you know, we, we’ve seen limited engagement from customs and border protection as well. That’s not to say they’re not going anywhere. I think there was, there was a symposium last week in Dallas, but certainly we were very concerned that TSA was not able to appear at the annual air cargo conference with there were 1100 stakeholders there, all of whom wanted to have discussions with TSA about the positions going forward. And we’re also very concerned, by the way. Speaking of TSA is a move to privatize the agency in Senate Bill 1108 that has now been referred to Senate Commerce Committee, basically calling for the privatization of TSA. We want to know what that’s going to look like. You know, the cargo screening and pasture screening was federalized after the passing of the Air Transportation Security Act, and I think from a cargo perspective, we’ve done a pretty good job with the help of TSA, at performing many of the required functions as an industry on our own with TSA oversight, so I think that’s good, but when you talk about passenger screening, it’s a totally different subject. It’s the Wild West. And I am curious to see what Congress has in mind if, in fact, they want to privatize.

Yael Katzwer
Right. And I’ve seen it compared to how prisons have been privatized

Brandon Fried
Exactly.

Yael Katzwer
And there’s a wide range of treatments and conditions and everything at prisons. And so I guess my concern is I look at it and go, How are you going to ensure that every single company doing this at every airport is following the same rule.

Brandon Fried
I think the prison analogy is appropriate, because you’re right. You’ve seen good ones and not so good ones. When there’s a profit making motive in there, you’re going to see cuts in providing essential services. And we’ve learned, unfortunately, on September 11, we’ve learned that this is an area on passenger screening where failure is not an option. We see it every day on cargo and we know that as an industry, and with the help of TSA, we have undertaken the cargo screening process successfully. We continue to do so, and we’re very serious about it. And now we’ve collected not only technology providers, but the canine screening providers, and they’ve done a very good job with it. And really, TSA at this point, just provides oversight, and now they still have 500 inspectors that are focused on air cargo, but they’re just there to watch. And of course, they’re they institute, you know, enforcement mechanisms as well. But the reality is, we’re doing the work. So it’s been privatized. On the cargo side. I’m not a fan of it personally. On the on the passenger side.

Yael Katzwer
And we’ve already spoken about tariffs, but I want to go to de minimis really quickly. How is the slow eradication of de minimis going to be affecting the forwarders in the US?

Brandon Fried
So at the air forwards Association, we have members who are in several niches. You know, freight forwarding is a is a business of niches. You have large forwarders that seem to be in everything, pharmaceuticals, general cargo, project cargo, and then you have medium and small forwarders that focus on in certain areas. And we do have a collection of members who made significant investments in E commerce, the shipping and processing of type, 86 entries coming in to the US. And for those members, we are concerned. Obviously, they’ve built their business model around de minimis, and from what we’re seeing now from the White House, all indications are that de minimis is over. But as was stated yesterday during one of the panels, the E commerce horse is is out of the barn. People like ordering online. There’s demand for it, but using the de minimis for it is is probably going to be a thing of the past, at least during this administration. So it was for those shippers and forwarders. It was a hugely successful program while it lasted, but there were concerns. The fentanyl issue as an example, was a concern. Maybe at the beginning. I think the precursors from fentanyl were coming in on the de minimis, but we found out through customs itself over time, really, most of that was coming in on trucks and mules on the southern border. So we’re hoping for more encouraging news. But for the time being, de minimis is over.

Yael Katzwer
And right now we’re seeing the news is changing every day. I mean, like you said, Monday, suddenly it’s like, oh, actually, we’re cutting that back. Sometimes by the minute, it’s a new rule. So how? How do you suggest forwarders keep up with that and make sure that they’re staying profitable when things are changing constantly? I mean, you build a strategy based on one set of rules, and then the next state’s a new set of rules. So you start building a new strategy, and then the next day it’s a new set of rules.

Brandon Fried
Yeah. So you know, freight forwarders are advisors, and our job is to advise shippers on the most optimal logistics strategy given the situation, and we know it’s challenging, so I think the primary advice we’re giving to our members is Don’t overreact, don’t under react. Don’t don’t react to tweets. You know, make sure that you’re following what’s going on. The White House. There are still a lot of smart people there, and we might not agree with policy, but the reality is, you’ve got trade people who were giving you instruction on how to proceed and make sure that you remain vigilant and that you’re following the ever changing pattern of events, and that you’re there with your customers, and you’re communicating with them and tell them, this is, this is likely to change, but as it stands today, this is what, this is what you need to be doing. It’s a big concern. You know, I think it’s a country. It’s just stand back and look at it. Uncertainty is, is, is really detested by business. You know, the President says he wants to restore us manufacturing. It seems hard to fathom investors are going to want to build factors here in the United States, knowing the policy can change in 15 minutes, 15 days, or even 15 weeks, these things take a long time to build, and that’s going to have an adverse impact on the consumer. I think the biggest casualty here so far this administration is consumer confidence. You know, we this was the golden goose, and now we’re, we’re we’re we’re poking her. And the reality is that the consumers hold back. I’ve talked to airlines. Airlines tell me they’re concerned because they’ve seen declines in tourist bookings and things like that. People are not so ready to stick their hands in their pockets, and all this has an adverse impact on shipping their freight forward so we’re very concerned.

Yael Katzwer
And how are you seeing all of these changes affecting relationships outside of the country with shippers, other forwarders, airlines outside of the country who are now looking at the US like, I don’t know what you guys are doing over there, but I’m not a fan, you know.

Brandon Fried
Exactly. So we’re, we’re extremely concerned about our image overseas. You know, the United States was the rock of stability. And now we’re, we’re being seen as a country that you can’t depend on anymore, whether, whether it’s really true or not. I mean the narratives, the narratives that include the annexing of Canada as the 51st state, the taking over of Greenland, and, you know, all that nonsense, and taking back the Panama Canal and all that. These are nonsensical things. And so we want to see that going down. There’s no place for that in trade, and so we’re extremely concerned. So what’s going to happen is this is, is that other countries are not going to see the United States as a viable trading partner, and they’re going to go around us, and they’re going to trade themselves between each other. Now that’s a loss of opportunity for the US, but I would say, and others have said, that if, if there were greater opportunities in those other countries, they already would have been seized, and they’ve already would have been going around the United States. The United States is not the only market, but it’s a big market, you know, it’s 13% of the trade, still a significant piece of it. So the situation needs to be resolved by the White House quickly. I’m optimistic that, you know, it will be. It’s not sustainable, but I think we’re going to see casualties in the process, and it’s unfortunate because it didn’t have to happen.

Yael Katzwer
In your view, what would be the best path forward right now? How can we how can we recover at the quickest pace?

Brandon Fried
Yeah, well, stop, stop the rhetoric coming out of the White House. You know, the President has to understand, he’s the leader of the free world, and I understand that. He says that that, you know, we’ve had trade deficits in these other countries have taken advantage of us. But the reality is that trade. Deficits are healthy. You know, there are places that we’re going to need their products they can’t give us. You know, we can’t give them anything back. We don’t have anything to give them. You know, if they’re growing mangoes in the country, that’s just the way it is. We don’t grow mangoes to that extent. So we’re going to have a trade deficit with that nation. So we have to have that realization. We also have to stop the narrative and the statement that other countries are paying these tariffs. Make no mistake about it, the American consumer, indirectly or directly, is going to be paying these tariffs. It’s going to increase the price of goods. It’s going to hide bad manufacturing behavior on our part in the United States. And in addition to that, it’s, it’s, it’s going to cost us jobs in the long run. It’s, it’s, it seems to be to them, to the to the administration, seems to be a quick fix. It’s really not there. We’re we’re living in a globalized world that other countries realize that we trade. We thrive on trade and so. But, you know, as I look at the as at the administration right now, there are some legitimate concerns coming out of the White House. As an example, are we military ready? You know, if, Lord forbid, we fall into some type of a World War, do we have a manufacturing basis required to support the military. Legitimate question, you know, the fentanyl issue, it’s a big one. Where is the fentanyl coming from? We say it’s coming from China. China says you it may be coming from here, but China says you have an addiction issue in the United States. We need to start looking at that as well, and we need to be more focused, pinpointed on where the problems are, and deal with them directly, broad brush approach to tariffs to countries that really did nothing wrong. It’s just not the way to go. And so what it says to those other countries, and by the way, it says to also big companies, is that if you have the wherewithal to come to Washington with your hat in your hand and sit down with the President, you can work a deal. And that’s just not the American way. I mean, that’s how maybe American business works, but that’s not how we run our country and our international relations. It’s wrong. So, um, anyway, I’m not saying all my members agree with me at all times, but I think the reality is going to have an adverse impact on our business and and, you know, we have to be more positive moving forward.

Yael Katzwer
And I also want to ask we talked to, spoke about TSA, the FAA is having issues as well.

Brandon Fried
Yeah, with the air traffic control?

Yael Katzwer
Yeah, they it’s outdated infrastructure, not enough controllers. What do you think needs to be done there to make sure that air cargo can continue to flow without I mean, we’re seeing interruptions, as we said before at Newark, and Newark’s not alone. Everyone has these outdated this outdated infrastructure and not enough people.

Brandon Fried
So using a freight forwarder means that the freight forwarder will be watching for bottlenecks, and certainly, while we’re having situations at Newark as an example, freight forwarders are going to reroute around Newark to other airports in the region, so that they don’t fall victim and start delaying free but that being said, there, there is no doubt that the air traffic control system, by the way, one of the most modern in the world, in terms of or most the safest in the world, not the most modest, the safest In the world is here in the United States. Excellent radar coverage, good air traffic control, for the most part, but it needs a revamping. We all know that. I mean, you know, we the FAA has said for years that it’s going to require billions of dollars of investment. They’re having trouble. They said at Newark, they have an average of three controllers on duty, and they have a goal of 14. This is a problem, and we’re not enough to encourage new entrants to come into the business, because of this antiquated technology and the high pressure it’s got to get it’s got to get taken care of. Now whether we could argue all day long, whether previous administrations had the opportunity and did nothing about it, but certainly now it’s time for Secretary Duffy and the Trump administration to get it done. Because, you know, we’re expecting growth to continue. I saw Ed dash in from Delta Airlines on one of the news shows this morning, and this growth is not going to stop. I think it’s unfortunate that United Airlines had to reduce its flight count into Newark because the FAA air traffic control system could not facilitate those flights. Now I don’t want to minimize you close a runway at a major airport. It’s going. Have an adverse impact, and you can’t forget that. But runways have to be closed. They have to be repaid. They, you know, they have to be rebuilt. And this happens. But the reality is, is that we need to find a better way. We need to get this job done now, this is not, you know, air cargo schedule, the it’s forecast to grow at 4% per year over the next 20 that’s significant growth. We want the airports ready to handle that. And that gets me into my next topic, and that’s, you know, we are still fighting the airport congestion flights. Matter of fact, our airport congestion committee is meeting this afternoon, two o’clock. I might have told you in the past that, you know, we have a mandate in the FAA reauthorization law that was passed over a year ago that there’s a general government accountability office study that’s now underway, that that we requested and got into, into the law where they’re looking At the airport cargo areas of most of the major airports throughout the United States. That study is well underway and expected sometime this summer. We’re hoping it validates the issue, because we still have trucks waiting two or three hours, and we’re not even in the pandemic yet, and that’s going to spike, by the way, once, once, freight starts flowing again after this quick break you know that we had during the transition, if you will, between the tariffs from China. Now that that’s going to become new, we’re going to see much more air freight. We’re going to see more longer lines. We want the government to see that. We need to have something done about it. So we’re going into a potential pilot program with Miami International Airport to prove to Congress what these are. These are projects within Miami that need to get done that they’ve been asking for for a long time, require federal investment. We’re going to Congress to ask for that money. You’ve seen one airport, you’ve seen one airport. So everyone has its own issues, but no one’s been looking at these cargo areas for 50 years, and they’re backing up. And that’s not good.

Yael Katzwer
I know part of the problem is just when they were built, the trucks weren’t that long, the planes weren’t that big.

Brandon Fried
I mean that 53 you look at a 53 foot tractor trailer today that didn’t exist 40 years ago. Yeah. And you know, kudos to the to the trucking lobby for getting that through. But the reality is, no one, no one notified the airport that these trucks will be trying to get in and move around. These, these road systems. You look at JFK as an example, it’s a nightmare, and that’s not going to improve until the federal government steps in. You know, the van wick expressway is still has access issues, and we got to fix that. Yeah, other, other and we, you know, it’s not unique to the United States. There are other countries that have issues as well. But air cargo is not slowing down, and it’s just going to be so hopefully, you know, and by the way, when we went to Capitol Hill to get this legislation passed. Sitting down with members of Congress in the Senate was an eye opener for them, because many people don’t understand how much cargo rides in the buildings passing the planes. But when we showed them photographs and videos of what was going on at the cargo areas, they were just wide open. They had no idea that was going on. So it often serves to provide awareness.

Yael Katzwer
All right, thank you so much for sitting down with me. I really appreciate it.

Jeff Lee
That was Brandon Fried, Executive Director of the Airforwarders Association, talking to Yael Katzwer, Deputy Editor of Cargo Facts, at last week’s CNS Partnership Conference in Miami. And that’s all the time we have today. For more coverage of the freighter aircraft and AAM market, visit cargofacts.com. Thank you very much for tuning in, and join us again next time.